Disparity in rents, foreign investment in Central China

In recent years, Chinese-funded institutions have settled in the core area of ​​Central. As a result, rents in Central have been repeatedly broken, and the rent gap between commercial areas in core and non-core areas is the largest in the world. Under the pressure of rent, foreign-funded institutions are expected to gradually move into the district to reduce costs.

According to the data from Savills, the Central Rental Rent Index of the Central China Building has recovered since 2014 and recovered in 2015. Its upward trend continues to this day. Last year it was a record high for rent for four consecutive quarters. The latest index has exceeded 560, according to the fourth quarter of last year. The monthly increase was again 1.4%. As for the data of Knight Frank, it also shows that the Central Plaza commercial building has continued to grow. The latest lease rate is RMB 155.2, which represents a year-on-year increase of 5.7%.

Non-core area rent 64% lower

In fact, since China-funded institutions have come to establish bases in Hong Kong in the past two to three years, especially the Central Grade A commercial buildings in Central District, the rents in Central have risen without falling after hiring for high-priced Central Offices. The original foreign institutions rented in Central District also faced the pressure of high rents, so they gradually considered moving out of Central. According to Jones Lang LaSalle’s report last year, Hong Kong’s Central office rents have been crowned globally for two consecutive years. The gap between office rents in non-core business districts and Central is 64%, and it is the highest in the world. The large rent gap is the biggest incentive for relocation.

Ten years ago, giants of investment banks such as Daimo and Credit Suisse had leased the Kowloon Station International Commerce Center (ICC) for logistics. In the past year or two, large foreign-funded institutions continued to move into non-core areas, including the investment bank JP Morgan Chase pre-renting more than 200,000 square feet of waterfront in Kwun Tong, and the group will move offices such as Sha Tin and Hong Kong Island East to the building.

In addition, at the end of last year, BNP Paribas implemented the pre-leasing of a total of 100,000 sq. ft. in the 8th floor of the Lincoln Plaza in Taikoo Place, Quarry Bay (01972). The rent was approximately 45 yuan, and the rental expense was only about 60% of the Central Office. Officially moved in.

As the new supply of commercial buildings in Central is almost zero, and Chinese-funded institutions continue to rent in Hong Kong, it is believed that rents for commercial premises in Central will still be stable during the year, rather than in core areas such as East Kowloon. As new supply continues to be more, rents are more Under the downward pressure, the rental gap has the opportunity to widen again. It is expected that non-core zone leasing cases will continue.